Amortization: The systematic and continuous payment of an obligation through installments until the debt has been paid in full.

Annual Percentage Rate (APR): A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan. The APR reflects the cost of your mortgage loan as a yearly rate. It will be higher than the interest rate stated on the note because it includes, in addition to the interest rate, loan discount points and fees, and mortgage insurance.

Appraisal: A report made by a qualified person setting forth an opinion or estimate of property value. The term also refers to the process by which this estimate is obtained.

Assessed Valuation: The value that a taxing authority places on real or personal property for the purpose of taxation.

Assessment: A charge against a property for purposes of taxation. This may take the form of a levy for a special purpose or a tax in which the property owner pays a share of the cost of community improvements according to the valuation of his or her property.

Borrower: A person (also known as Mortgagor) who receives funds in the form of a loan with and obligation to repay principal with interest.

Buydown: A payment to the lender from the seller, buyer, or third party, causing the lender to reduce the interest rate.

Closing: The consummation of a real estate transaction. The closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to complete the sale and loan transaction.

Closing Costs: Money paid by the borrower in connection with the closing of a mortgage loan. This generally involves an origination fee, discount points, appraisal, credit report, title insurance, attorney's fees, survey and prepaid items such as taxes and insurance escrow payments.

Closing Statement: A form used at closing that gives an account of the funds received and paid at the closing, including the escrow deposits for taxes, hazard insurance and mortgage insurance.

Co-Borrower: Additional borrower(s) whose income contributes to qualifying for a loan and whose name(s) appears on all documents with equal legal obligations.

Commitment (Loan): A binding pledge made by the lender to the borrower to make a loan, usually at a stated interest rate within a given period of time for a given purpose, subject to the compliance of the borrower to stated conditions.

Conforming Loan: Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). These agencies generally purchase traditional fixed rate level payment first mortgages up to loan amounts mandated by Congressional directive.

Conventional Mortgage: A mortgage not obtained as under a government insured program (such as F.H.A. or V.A.).

Credit Report: A report detailing an individual's credit history.

Deed of Trust: A legal instrument conveying title held in trust by a third party. In such cases, a trustee retains the title until a loan debt is repaid. In some regions, it is used in place of a mortgage.

Default: The failure to perform an obligation as agreed in a contract.

Depreciation: A loss of value in real properly brought about by age, physical deterioration, functional or economic obsolescence,

Discount Point: Amount payable to the lending institution by the borrower or seller to increase the lender's effective yield. One point is equal to one per cent of the loan amount.

Earnest Money: A portion of the down payment delivered to the seller or an escrow agency by the purchaser of real estate with a purchase offer as evidence of good faith.

Equal Credit Opportunity Act (ECOA): A federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs or past exercising of rights under the Consumer Credit Protection Act.

Equity: The ownership interest - that portion of a property's value over and above the liens against it.

Escrow: A procedure whereby a disinterested third party handles legal documents and funds on behalf of a seller and buyer.

Fair Credit Reporting Act (FCRA): A federal law which requires a lender who is rejecting a loan request because of adverse credit information to inform the borrower of the source of such information.

Federal Home Loan Mortgage Corporation - FHLMC (FREDDIE MAC): A corporation authorized by Congress to purchase conventional home mortgages. It sells participation certificates whose principal and interest are guaranteed by FHLMC.

Federal National Mortgage Association - FNMA (FANNIE MAE): A tax-paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration as well as conventional home mortgages.

First Mortgage: A real estate loan that has priority over any subsequently recorded mortgages.

Fixed Interest Rate: An interest rate which does not change during the loan term.

Foreclosure: A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.

Gift Letter: A written explanation signed by the individual giving the gift stating, 'This is a bona fide gift and there is no obligation expressed or implied to repay this sum at anytime."

Hazard Insurance: A contract whereby an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards.

Interest: Consideration in the form of money paid for the use of money. Also a right, share or title in property.

Lien: A legal claim or attachment against propeny as security for payment of an obligation.

Loan-To-Value Ratio: The ratio between the amount of a given mortgage loan and the lower of sales price or appraised value.

Market Value: The highest price which a ready, willing and able buyer would pay and a willing seller will accept, both being fully informed under no pressure to act. The market value may be different from the price a property can actually be sold to( at a given time (market price).

Mortgage: The conveyance of an interest in real property given as security for the payment of a loan.

Mortgagee: The lender in a mortgage transaction.

Mortgage Insurance Premium (MOP): The consideration paid by a mortgagor (borrower) for mortgage insurance - either to the FHA or to a private mortgage insurer.

Mortgage Note: A written promise to pay a sum of money at a stated interest rate during a specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.

Mortgagor: The borrower in a mortgage transaction who pledges property as security for a debt.

Occupancy: The use of property as a full-time residence, either by the title holder (owner-occupancy) or by another party thorough formal agreement (rental).

Origination Fee: The amount charged for services performed by the company handling the initial application and processing of the loan.

PITI (Principal, Interest, Taxes and Insurance): The most common components of a monthly mortgage payment.

Preliminary Title Report: The result of a title search by a title company prior to issuing a title binder or commitment to insure clear title.

Primary Residence: A residence which the borrower intends to occupy as the principal residence.

Principal Balance: The remaining balance due on a debt.

Private Mortgage Insurance: Insurance written by a private company protecting the mortgage lender against loss resulting from a mortgage default.

PUD (Planned Unit Development): A planned combination of diverse land uses, such as housing, recreation and shopping one contained development or sub-division. A major feature of a PUD includes areas of common land for use by the housing unit owners; the association of unit owners generally owns, pays fees and maintains the common areas.

Purchase Contract (Agreement/Offer): An agreement between buyer and seller of real property, setting forth the price and term of the sale. Also known as a sales contract.

Real Estate Settlement Procedures Act (RESPA): A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances and the disclosure of settlement costs.

Refinancing: The repayment of a debt from the proceeds of a new loan using the same property as security.

Satisfaction of Mortgage: The recordable instrument issued by the lender verifying full payment of a mortgage debt.

Second Home (Vacation Home, Weekend Home): A residence other than the borrower's primary residence which the borrower intends to occupy for a portion of each year. Must be suitable for year-round occupancy.

Second Mortgage: A loan on property which already has an existing mortgage (the first morlgage). The second mortgage is subordinate lo the first.

Secondary Mortgage Market: A market where existing mortgages are bought and sold. It contracts with the primary mortgage market where mortgages are originated.

Survey: The measurement and description of land by a registered surveyor.

Term: The time limit within which a loan must be repaid.

Title: The legal evidence of ownership rights to real property.

Title Insurance Policy: A contract in which an insurer, usually a title insurance company, agrees to pay the insured party a specific amount for any loss caused by defects of title on real estate in which the insured has an interest as purchaser, mortgagee, or otherwise.

Title Search: An examination of public records to disclose the past and current facts regarding the ownership of a given piece of real estate.

Truth-in-Lending Act: A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of financial institutions.

Underwriting: Analysis of risk and setting of an appropriate rate and term for a mortgage on a given property for given borrowers.